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Working paper

Estimating sustainable output growth in emerging market economies

Ponomarenko A., Derugina E., Krupkina A.
In the spirit of Borio et al. (2014) we present a model that incorporates information con-tained in diverse variables when estimating sustainable output growth. For this purpose, we specify a state-space model representing a multivariate HP-filter that links cyclical fluctua-tion of GDP with several indicators of macroeconomic imbalance. We obtain the parame-terization of the model by estimating it over a cross-section of emerging market econo-mies. We show that trend output growth rates estimated using this model are more stable than those obtained with a univariate version of the filter and thus are more consistent with the notion of sustainable output.